Saturation point for pasta

While the sector has experienced healthy growth of up to 10% for the past few years, the region is also home to a high number of brands, which can make the sector tough for many premium brands and new players. This is perhaps best illustrated by Dolmio pasta, a well-known premium brand, which de-listed from GCC stores a year or two ago.

“Dolmio pasta had low volume and low profit,” a spokesman for Dolmio’s owner Master Foods, complained to Retail News Middle East. “You find a lot of imports or locally produced brands that are at a lower price,” he added.

But not all companies are finding the sector quite so hostile. Federica Verna, marketing manager for pasta at Al Ghurair Foods, a Dubai-based producer of pasta admits that the market is tough, but is pleased with progress made by the company’s pasta products since their introduction to the UAE in 2003.

“Pasta is just a baby at Al Ghurair Foods,” she said. “We launched pasta in the UAE in 2003 and now we are launching our pasta across the Middle East. We are in 16 markets at the moment. All the GCC and Levant and we are launching our pasta in North Africa especially in Egypt, Morocco, Sudan and Algeria. We are sold in 13 or 14 countries at the moment and in the UAE, we are selling quite well.”

Verna estimates that around the GCC, the pasta sector is growing at around 5% to 6%. In some North African markets, meanwhile, the figure could be far higher at up to 15%. “Pasta is just starting to enter into the diet of people in the region,” she said. “It is considered nutritious and convenient. It takes just a few minutes to prepare a meal.”

Furthermore, Verna also thinks the sector will continue to perform well, and that sales could increase further. “This is why we are working very hard…we think this category has a high potential,” she said. And Verner points to Syria as a particularly lucrative market. The country is one of the fastest growing markets for Al Ghurair’s pasta. The brands were also listed recently in Saudi Arabia, where they also seem to be performing quite well.

Al Ghurair Foods has two pasta ranges; Jenan Green, made with semolina from Canada and, Jenan Rosa, which was introduced this year and is made from a mix of flour and semolina. “Our quality is the same level as the Italian pasta but we can offer our products at a more competitive price because it is produced locally. We have the biggest pasta factory in the Middle East,” Verna said.

Despite this, Verna admits the market is tough, with heavy competition from numerous local producers that are strong in regional markets. To this end, Al Ghurair is attempting to maintain a lead by offering a range of products to meet diverse consumer needs. “That can give us an advantage,” Verna said. “Giving products that customers are looking for and having a big visibility – that is important on a crowded shelf.”

Al Ghurair is also trying to operate through the best distributors available in each country, and is investing in the category through above-the-line advertising with the slogan: “Jenan Pasta Cooks just right.” The company also encourages below-the-line activity such as consumer promotions. Verna also thinks that being a local player has helped the company to better understand the market.

In terms of sales channels, supermarkets represent about 50% of Al Ghuarair’s pasta sales. Jenan Green is listed in supermarkets, while Rosa is in all of the channels, mainly wholesale. “We’ll soon be launching a new range of pasta, a very soft pasta and other new concepts for different target audiences and different consumer needs, such as health,” Verna said.

Sheeraz Siddiqui, national sales manager at UAE-based pasta producer Emirates Macaroni Factory, which produces the Emirates Macaroni brand, also points to strong growth in the sector, of around 10%. “There has been double digit growth, at least in the UAE market, for the last three or four years – and in the modern trade like hypermarkets and department store chains, it is more like around 15% for our main products.”

For Siddiqui, much of this increase is down to an increasing population and a shift in the retail trade from smaller grocery stores to supermarkets that is benefiting more dynamic producers. “Before there was a lot of business for the unorganised market such as small groceries, but now since people have started going to a bigger market, like Carrefour and Co-operatives, so sales in those outlets has increased and that’s why organised players are getting benefit,” he said.

Product visibility in store is also vital, and a shift towards convenience food has also benefited the overall pasta sector, according to Siddiqui. “Generally all variants are increasing but it depends on visibility,” he said. “It depends on the visibility and the better the visibility, the more the product moves.”

But customers’ buying habits are also changing in line with a greater desire for convenience food. Siddiqui has not seen any higher-end products appear on the market in the past couple of years, but has noticed a drop in prices in the wholesale sector, as ever- greater amounts of pasta – much of it from Turkey – appears on the market.

Competition is also increasingly fierce for branded pasta. “About five years ago, there was a limited number of brands available mostly from Italy and one from Saudi Arabia and very few from the UAE,” Siddiqui said. “Now there are brands from Kuwait, more brands from Saudi Arabia and more from Italy, so there is an influx of more brands now.
We have a market share of about 50% with Emirates Macaroni in the UAE, with the different brands we have.”

While the company’s own-label and branded products are in competition with each other, the branded pasta is growing faster. “It is difficult to say because all of this private label pasta has arrived recently so two and half years ago, LuLu or Carrefour did not have it’s own pasta. Since they have introduced this, their growth is higher than the average growth of the industry.

Branded pasta faces stiff competition from private label pasta available in supermarkets and hypermarkets such as Carrefour, LuLu, and Union Co-op, although EMF views this as an opportunity, as it also produces own-label products for the bigger retailers. Own label products account for about 10% of EMF’s business.

Emirates Macaroni Factory exports to numerous countries in the MENA region, including the UAE, Saudi Arabia, Kuwait, and East Africa. The company’s biggest market is the UAE, where it has a 50% share of the pasta sector.

But while Emirate Macaroni Factory is increasing its market share, Siddiqui admits that the there are challenges in the sector such as rents inside supermarkets. “Supermarket rents have gone up tremendously in the past couple of years and there is not much scope to increase the price because all supermarkets and hypermarkets are competing with each other, so everyone wants to sell it at a lower price,” he said.

“Rents can be as high as AED 2,500 per month for a full shelf, which is quite expensive,” he added. “The bigger supermarkets started charging more for promotion spaces, so rent and expenses on bigger outlets are increasing a lot – and this is separate from the listing fees, which have also increased by up to 200% in the past couple of years.”

In order to cope with these challenges and increased competition, Emirates Macaroni Factory plans to spend more on branding and give more value to customers and carry out more activities such as in-house promotions. “There’s a combination of activity basically. That’s how we plan to go ahead.”

Ramkishore Kattamenu, media manager at Ifcap, an FMCG company that is part of the Iffco group, puts growth in the pasta sector higher than most other industry insiders. Iffco is a leading player in the UAE and GCC pasta sector, giving Kattamenu a good insight into the category. He estimates that the sector is growing at a rate of about 15% to 20% across the GCC.

Meanwhile, in the UAE at least, he puts this growth down to an influx of expatriates. “The population has grown from,” he said. “From two million in 1995 to an estimated four million or more now. ” But Kattamenu also points to changing eating habits, with people becoming “more global and cosmopolitan in their eating habits.” He also points out that pasta is the third staple food in the world after wheat and rice, and that people are increasingly discovering the health benefits of pasta.

In terms of changes in the sector, Kattamenu has noticed a shift towards specialist pasta products such as ravioli and rottini, and shapes such as farfelle and cavatappi.
Salim Irshad, general manager at Emirates Snack Foods Llc, agrees that population growth is a leading driver behind the growth of the pasta category in the region.

“It’s pretty much growing in sync with population growth, which was to be expected,” he said. And amid tough competition, Irshad said Emirates Snack Foods is able to maintain a strong position by because it is an exclusive agent for Barilla in the UAE, one of the world’s leading pasta brands. This means we have a vast range of pasta products and good support from a strong principal,” he said.

“There is also a quality advantage which becomes ever more important as people’s tastes start getting more cosmopolitan and they start being able to distinguish between qualities.” He added that ESF is soon to start distributing Barilla in Oman.

While Irshad acknowledges that cheaper bands of pasta are enjoying a surge on the back of a squeeze on household budgets and a rise in the number of bachelors, he points out that higher quality products are also performing well due to a growing awareness and appreciation of quality pasta among many consumers in the region. “With pasta, our dominant presence in the food service sector also stimulates peoples demand for quality pasta,” Irshad said.
||**||